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| About Timothy Ferriss |
| Serial entrepreneur and ultravagabond Timothy Ferriss has been featured by dozens of media, including The New York Times, National Geographic Traveler, NBC, CNN, and MAXIM. He speaks six languages, runs a multinational firm from wireless locations worldwide, and has been a popular guest lecturer at Princeton University since 2003, where he presents entrepreneurship as a tool for ideal lifestyle design and world change. The 4-Hour Workweek is his first book on lifestyle design and details how to outsource and automate your life. |
Recent Article:
Lifestyle Investing: “Compound Time” Like Compound Interest?
- For more on Timothy Ferriss visit www.4hourworkweek.com
I met David Kutoff in Omaha at the Berkshire Hathaway annual shareholder meeting, and he asked me an interesting question:
Do you think that the value of time can compound like interest?
Three glasses of wine into a post-event party with Cirque du Soleil performers, I didn’t have a good answer, but David recently sent me a thought-provoking e-mail I thought I’d share.
How might better use of your time compound? David explores:
Bear with me, this is somewhat rough at the moment — my initial quandary was whether time, like currency, could be invested to produce a compounding effect. After a bit of thought, my conclusion is that the value of ones time could experience a significant gain, and perhaps a compounding effect over time, given an investment of [that present-state] time in knowledge, skill or other capacity, and a reinvestment of future gains (just like currency).
Money and currency — accumulated excess money — represent one part of your capacity to transact in the marketplace, and can be exchanged for help from others in the form of products or services, including “things” like consumables, depreciable and appreciable assets. Similarly every action you take, whether it be transaction-related or not, requires the expenditure of some amount of time, which is roughly fixed for all of us (say 10,000 working days between the ages of 22 and 62).
Much like currency can be exchanged for appreciable assets that can grow with a compounding effect over time if the gains are re-invested, my theory is that time can be thought about in a similar way, which may lead to more effective action.
To put this in terms of your thinking from your book, lets say you work 40 hours per week simply performing tasks requested by your employer, none of which produce any additional future potential for generating income for yourself.
This is the equivalent of spending your money on consumables or living expenses. It’s single use, and gives you no real future gain, aside from whatever currency you might earn in the moment. Now, you decide to outsource 50% of your tasks to India, producing the same outcomes with 50% of your time. You just doubled the value of your time compared to before (less the additional expense for the help). Now, with that free time, you get more rigorous about working out, studying, and building your networks. You increase your energy, skill, and capacity working with others and manage to produce yet the same results that were taking 50% of your time with only 30%. If you keep reinvesting some of your time in additional gains in your capacity to act, you can theoretically have a compounding effect with the value of your time (rather than time itself). Just like investing currency, the earlier you start this process, and continue to invest in your capacity, the more time your capacity has to compound, and the greater outcomes you can produce during your lifetime.
Lifestyle Investing Compound Time Like Compound Interest - To learn more about this author, visit Timothy Ferriss's Website.
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